Kategorie: Crypto News

Kyle Davies, one of the co-founders of Three Arrows CAPITAL (3AC), has said that the crypto hedge fund is exploring different options including getting rescued by another firm or asset sales. This comes after some top crypto exchanges liquated the firm’s leveraged positions.

Three Arrows Capital has grown to become one of the largest crypto-focused hedge funds over the past few years. However, after the Terra (LUNA) debacle a month ago and the current crypto market meltdown, the firm has been undergoing difficult times.

Liquidation of 3AC positions

Bitmex, Deribit, and FTX crypto exchanges have already Liquidated Three Arrows Capital Leveraged Positions.

While the two co-founders of Three Arrows remained mum on the fate of the hedge fund, Davies opened up about the dire situation that the firm was facing during an interview with the Wall Street Journal (WSJ).

During the interview, Davies admitted that the firm had suffered losses following the collapse of the TerraUSD (UST) and Terra (LUNA), currently LUNA Classic. In particular, Three Arrow Capital along with others had participated in a $1 billion token sale conducted by the Luna Foundation Guard. Three Arrow Capital had invested $200 million in the token sale.

Davies said:

“The Terra-Luna situation caught us very much off guard.”

Besides the Terra (LUNA) debacle, the plummeting crypto prices are also hurting 2AC long crypto positions.

Addressing the situation, Davies said:

“This has pushed 3AC into looking for desperate options, including asset sale and a rescue by another firm.”

But he was quick to note that they are not the first to be affected by the current situation saying that many other firms have also been affected.

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Due to the ongoing crypto market meltdown, Babel Finance, an Asian-based crypto lender firm, has suspended all their products’ redemptions and withdrawals from clients, noting that their firm is facing ‘’Unusual liquidity pressure.’’

Today, June 17, Babel Finance wrote a notice on their official website to inform their customers of the decisions they are taking to protect them as the markets continue to trade sideways. It’s important to note that majority of the institutions in the crypto industry have been through conductive risk events.

The notice read:

‘’Recently, the crypto market has seen major fluctuations, and some institutions in the industry have experienced conductive risk events. Due to the current situation, Babel Finance is facing unusual liquidity pressures. We are in close communication with all related parties on the actions we are taking in order to best protect our customers. During this period, redemptions and withdrawals from Babel Finance products will be temporarily suspended, and resumption of normal service be notified separately. We apologize sincerely for any inconvenience caused.’’

DeFi platforms increasingly pausing withdrawals

With the plunging crypto markets, DeFi platforms seem to be resulting in pausing withdrawals with others like Celsius going as far as pausing swaps and internal transfers.

Yesterday, Finblox, a staking platform, also shared a tweet stating that they have restricted withdrawals from their platform to $1,500 per month from a limit of $500 per day as a result of its connection with the Three Arrows Capital (3AC).

IMPORTANT UPDATE FROM FINBLOX! pic.twitter.com/VjclRMMiSe

— Finblox (@finblox) June 16, 2022

Three Arrows Capital has found itself at the center of insolvency speculations following the deteriorating crypto prices. Today, the firm’s leveraged positions were liquidated by the three crypto exchanges namely FTX, BitMEX, and Deribit.

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In a move to reduce exposure to the embattled Celsius Network, MakerDAO has voted to temporarily disable the Direct Deposit Module (D3M) of DAI for DeFi lending platform Aave. Aave users will not be able to access DAI loans on Aave using stETH as collateral through the Direct Deposit Module.

MakerDAO is the organization behind the DAI stablecoin.

Through a tweet made on Thursday, MakerDAO announced that its community members had voted to temporarily suspend Aave DAI Direct Deposit Module.

The Maker Governance has voted to temporarily disable the @AaveAave DAI Direct Deposit Module (D3M).

This change is available for execution on June 17 2022 21:03 UTC.

🗳 https://t.co/3wKQiEvcMw

— Maker (@MakerDAO) June 15, 2022

According to the tweet, the outcome of the vote was to be executed from June 17 2022 21:03 UTC.

Reducing Maker’s exposure to Celsius

The governance proposal to disable DAI supply on Aave was put forward earlier this week in an attempt to reduce Maker’s exposure to the besieged crypto lending platform Celsius.

According to the governance proposal, the Target Borrow Rate will be set to zero in the smart contract responsible for D3M thus preventing further borrowing by Celsius using Aave’s D3M.

Part of the proposal read:

“This change is being proposed to temporarily disable the Aave D3M. The Aave DAI Direct Deposit Module (D3M) Target Borrow Rate (bar) will be set to 0”

How the Direct Deposit Module (D3M) works

The Direct Deposit Module (D3M) is the one that allows interactions between the Maker ecosystem and other third-party lending pools including Aave. The main objective of the D3M is to maintain DAI’s interest rate across the lending pools, especially on Aave.

Currently, Aave has a total exposure of 200 million DAI tokens through the D3M. Out of that, 100 million DAI tokens are borrowed by Celsius using stETH (a representation of ETH staked with Lido) collateral.

Celsius relationship with stETH

Celsius earlier this week indefinitely paused withdrawals, swaps, and transfers amid growing concerns about the crypto lender exposure to stETH. There was growing uncertainty on stETH due to the upcoming Ethereum merge that made stETH to lose its peg against ETH.

As a result, there was very heavy selling pressure on the stETH putting Celsius in a precarious position since it had locked customer funds into stETH.

If the worst comes to the worst and Celsius becomes insolvent and faces a margin call, it would be forced to dump its stETH; something that would cause the stETH to de-peg further from ETH. This would mean the 100 million DAI tokens that MakerDAO had lent to Celsius would become irrecoverable.

To protect their lending power and prevent Celsius from borrowing more DAI tokens using stETH as collateral, MakerDAO has voted to temporarily disable the D3M.

According to a proposal referred to as “proposal 83, following the disabling of D3M, Aave is also considering freezing stETH and its use as collateral on the platform.

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The crypto market maintained its bearish trajectory over the past 24 hours, as the majority of top 10 cryptos were in the red this morning. 

Top cryptos

Bitcoin was down more than 5% at time of writing, trading around $20,700. Ethereum, the second crypto, is trading around $1,100, down almost 40% the last 7 days. 

Cryptos outside the top 10 mostly registered slight gains in the range of 2-4%. Polkadot is at #11 with a loss of around 4% in the last 24 hours. 

Top movers

Outside the top 20, cryptos were mixed. Helium continues its ascent, up around 7% today. Elrond and Theta Network are also up around 7%. Closing out the winners’ list is Bora, up around 6%. 

On the other end, Nexo continues to drop, down 6% so far today. THORChain and Flow are down 5%.

Trending

The biggest winner today is SIRIN LABS Token (SIRIN), a utility token to be used as a payment method within the ecosystem of the company that created it, Sirin Labs.

At present, the ecosystem consists of FINNEY smartphone, SIRIN OS, SIRIN Labs retail locations, and their dApp store. The company is working on the first blockchain smartphone in history. SIRIN gained 961% today.

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